D.C. region’s bio investment slows to a crawl in third quarter

Washington-area biotechs have struggled for years to raise capital, but even by those cash-starved standards, recent venture investment in the region’s life sciences companies has been paltry.

The trickle of third-quarter investment underscores the dichotomy between the haves and have-nots of Maryland biotech.

On one side are established names like Human Genome Sciences Inc. and MedImmune as well as growing companies like GlycoMimetics Inc. that have won big-ticket partnerships with pharmaceutical giants. On the other side is a cluster of early-stage bio startups scrounging for capital.

Despite the status of Maryland’s Interstate 270 corridor as a national biotech hub, greater VC investment actually went to Baltimore and southwest Virginia bio startups.

The lack of outside investment in I-270 biotechs puts greater pressure on a company to attract big pharma to fund development and approval of its products but paradoxically makes it tougher to win those deals.

GlycoMimetics announced this month a licensing deal with Pfizer Inc. worth up to $340 million for the Gaithersburg company’s sickle-cell drug candidate. But GlycoMimetics has raised tens of millions in venture dollars. Other biotechs, without the same access to capital, will struggle to develop their pipeline to the point of interesting big pharma.

“That gap is increasing,” said Brad Stewart, CEO of Columbia, Md.-based Cylex Inc. “It’s harder and harder to get funding to pay for that early development. Most pharma companies are waiting later and later to make decisions.”

During the third quarter of last year, the region’s biotechs raised $35 million in venture capital, including a $15 million Series A round for Gaithersburg-based Zyngenia Inc. This quarter, there was no such blue-chip bio deal.

I-270’s struggles to raise capital track with a nationwide slowdown in bio investment, as VCs flee to information technology startups that have a quicker route to an exit and less intense capital needs. The dollars invested in biotech dropped 18 percent over the prior quarter to $1.1 billion and saw a shift to big, late-stage deals.

The year started with half a dozen bio IPOs and “quite a bit of optimism,” Nina Kjellson, general partner at InterWest Partners in Silcon Valley, said at an Oct. 18 conference call. InterWest led the funding round for USDS

“We’re now returning to the underlying volatility and conservatism that really has been the theme for the last 18 to 24 months in life sciences,” Kjellson said.